CORE ISM Supply Management Core Exam Free Practice Exam Questions (2025 Updated)

In the situation where the selected bidder wants to raise its quoted rates due to the scarcity of qualified trainers:

Binding Quotation: Remind the supplier that their quoted rates are binding. This ensures that the supplier adheres to the terms of the initial agreement, maintaining integrity and preventing cost escalations after the bid has been accepted.

Contract Enforcement: Emphasize the importance of contract enforcement to maintain fairness and transparency in the procurement process.

Negotiation: If necessary, negotiate within the agreed terms, but initially, the focus should be on holding the supplier accountable to their quoted rates.

By reminding the supplier that their quoted rates are binding, the supply manager upholds the integrity of the procurement process and ensures that the organization is not subjected to unexpected cost increases.

References:

Contract management principles in procurement.

Institute for Supply Management (ISM) guidelines on handling procurement disputes and negotiations.

An audit committee is primarily responsible for overseeing the organization's financial reporting and internal control processes. Their main focus areas include ensuring compliance with legal and regulatory requirements, the effectiveness of internal controls, and the accuracy of financial reporting.

Paperwork needed to remain compliant with regulations: While important, this is more operational and administrative in nature.

Whether policy changes will optimize profits: This falls under strategic decision-making, which is typically outside the primary scope of an audit committee.

The existence of appropriate internal controls: This is a critical responsibility of the audit committee. They must ensure that there are adequate internal controls to prevent fraud, errors, and ensure accurate financial reporting.

Forecasted sales and revenues: This is more related to financial planning and analysis, not the direct focus of the audit committee.

Thus, the most appropriate for review by an audit committee is the existence of appropriate internal controls.

References:

Institute of Internal Auditors (IIA) standards on audit committee responsibilities.

Corporate governance literature on the role of audit committees.

To ensure suppliers are aligned with the organizational goals, it is essential to compare the suppliers' capabilities and vision with the firm's vision and mission.

Contact current suppliers to determine their maximum production capacity at the necessary quality levels: Useful, but does not ensure alignment with organizational goals.

Conduct market research to identify characteristics needed by potential suppliers: Important, but it should be followed by alignment checks.

Facilitate meetings between internal stakeholders and external stakeholders: Valuable for communication but does not guarantee alignment.

Compare the firm's vision and mission to potential suppliers' capabilities: This ensures that the suppliers can support and align with the strategic objectives of the firm, ensuring long-term compatibility and success.

Therefore, the best way to ensure suppliers are aligned with organizational goals is to compare the firm's vision and mission to potential suppliers' capabilities.

References:

Supplier relationship management best practices.

Strategic alignment in procurement literature.

The best description of the strategic sourcing process is D. A series of actions to identify suppliers to provide needed products/services for the organization. Strategic sourcing is a systematic and data-based approach for optimizing an organization’s vendor base and improving overall value propositions for software and services1. It involves planning, managing, and optimizing supply chain activities, which includes identifying suitable suppliers2.

Understanding the Context: The firm differentiates inventory purchasing into "repairable parts" and "consumable parts" for its automotive division.

Category Management Definition: Category management involves dividing products into discrete groups or categories and managing each category as a business unit.

Application to Inventory: By separating the inventory into repairable and consumable parts, the firm applies category management principles to better manage costs and supply chains tailored to each category's unique requirements.

References

CIPS. (n.d.). What is Category Management?

SCMDOJO. (n.d.). Benefits and Challenges of Category Management in Procurement.

Negotiation Tactics: Suppliers can use various tactics to gain an advantage in negotiations.

Power Position: DEF is the primary source for the material and is aware that XYZ has limited alternatives due to lead time constraints.

Delays and Postponements: By delaying negotiations, DEF might be trying to leverage its power position, knowing XYZ cannot easily switch suppliers.

Implications for XYZ: XYZ may feel pressured to concede to DEF’s terms due to the urgency of their need for the materials.

Strategic Response: XYZ needs to consider strategies to mitigate DEF's leverage, such as seeking alternative suppliers in the long term or negotiating better terms to manage future risks. References

Fisher, Ury, and Patton’s "Getting to Yes: Negotiating Agreement Without Giving In".

Positional bargaining is a negotiation strategy where each side adopts a fixed position and then negotiates to close the gap through concessions and compromise. This approach focuses on maintaining specific demands and making adjustments to reach a mutually acceptable agreement. It contrasts with interest-based bargaining, which focuses on underlying interests rather than fixed positions.

References

Getting to Yes: Negotiating Agreement Without Giving In by Roger Fisher and William Ury

Harvard Business Review articles on negotiation tactics

A cash flow budget is a financial plan that links expenditures to revenue within each budgetary period. It details the expected cash inflows and outflows over a specified period, allowing a business to plan for covering expenses with anticipated revenue. This type of budget is crucial for managing liquidity and ensuring that the company can meet its financial obligations as they come due.

References

"Financial Management: Theory & Practice," Eugene F. Brigham and Michael C. Ehrhardt.

"Principles of Corporate Finance," Richard A. Brealey, Stewart C. Myers, and Franklin Allen.

The MOST effective way for a firm to approach the need for new and improved product offerings without the necessary personnel or resources is A. Seek opportunities for supplier collaboration and product innovation. Collaborating with suppliers can bring in external expertise and resources, fostering innovation and potentially leading to the development of new and improved products. This approach leverages the capabilities and innovation potential of suppliers, which can be particularly valuable when a company lacks the internal resources to undertake such tasks on its own1234.

For MNO, Inc., a manufacturing operation that has expanded globally, establishing a regional sourcing office that is centrally supported would be the most effective strategy. This approach allows the company to leverage local expertise and proximity to suppliers, improving responsiveness and reducing lead times. At the same time, central support ensures that all regional offices align with the overall corporate strategy and maintain consistency in procurement policies and standards. This hybrid model combines the benefits of local sourcing with the advantages of centralized control and coordination.

References

ISM (Institute for Supply Management). Global Supply Chain Management.

CIPS (Chartered Institute of Procurement & Supply). Strategic Procurement in Global Markets.

Item cost: $0.76

Packaging for shipment: $0.02

Shipping from Indonesia: $0.14

Duty: $0.03

Customs clearance: $0.10

Storage at buyer’s warehouse: $0.09

Shipment from warehouse to plant: $0.06

Calculate the total landed cost per unit: Sum of all the costs.

Total Landed Cost = $0.76 + $0.02 + $0.14 + $0.03 + $0.10 + $0.09 + $0.06 = $1.20

References

CIPS. (n.d.). Understanding Total Landed Cost in Procurement.

ISM. (n.d.). Calculating Total Landed Cost for Procurement Decisions.

Annual Business Review Focus: The goal is to address a supplier's service performance and product quality.

Using a Scorecard: A scorecard based on internal surveys provides a structured and comprehensive way to evaluate and communicate performance metrics.

Feedback Collection: Internal surveys gather feedback from various departments that interact with the supplier, offering a holistic view of their performance.

Performance Metrics: The scorecard includes key performance indicators (KPIs) that are relevant to service performance and product quality, facilitating objective assessment and discussion during the review.

References

ISM (Institute for Supply Management). (n.d.). Supplier Performance Metrics and Scorecards.

APQC. (2018). Using Scorecards for Supplier Performance Management.

Including language regarding the proper disposal of waste in a service level agreement typically addresses compliance with regulatory requirements. These regulations ensure environmentally safe disposal practices. While lead time requirements (B), cost goals (C), and engineering specifications (D) are important in contracts, waste disposal primarily falls under regulatory compliance. References: Service level agreements and regulatory compliance guidelines, environmental regulations in procurement.

Utilizing a freight forwarder can help ensure timely deliveries and reasonable transportation costs. Freight forwarders are experts in logistics and can manage the complexities of international shipping, including scheduling, tracking, and consolidating shipments to optimize costs. They can also provide valuable insights and support to navigate customs and other regulatory requirements.

References

International Federation of Freight Forwarders Associations (FIATA). Role of Freight Forwarders.

CIPS (Chartered Institute of Procurement & Supply). Managing Global Logistics and Transportation.

The MOST likely concern for JKL, Inc. regarding the supplier’s increased production rate from 100 to 105 units a month would be B. Deteriorating quality. When production rates increase beyond the standard capacity, there is a risk that the quality of the products may decline as the process may be rushed or overextended1. This is a common concern in supply chain management, as maintaining the quality of products is crucial for customer satisfaction and the company’s reputation2.

The supply manager is facing a situation where the training budget has been cut, limiting the ability to train new employees despite having approval for additional personnel and equipment. The most effective action is to:

Identify the Impact: Understand and outline how the lack of training will impact the department's performance, efficiency, and ability to meet organizational goals.

Present Justification: Develop a detailed justification that shows the correlation between training and cost reduction goals. Explain how effective training leads to better employee performance, reduces errors, and increases productivity, ultimately saving costs.

Data and Examples: Use data and examples to support the argument. This could include metrics on employee performance before and after training, case studies, or industry benchmarks that highlight the importance of training.

Align with Organizational Goals: Ensure that the justification aligns with the overall strategic goals of the organization, demonstrating that investing in training will contribute to achieving these goals.

By presenting a well-supported justification, the supply manager can make a compelling case for restoring the training budget to support the department's expertise and efficiency.

References:

Institute for Supply Management (ISM) guidelines on training and development.

Articles and case studies on the impact of employee training on cost reduction and performance improvement.

Given Data:

Unit price: $0.40

Annual usage: 80,000 units

Carrying cost: 25%

Minimum order quantity: 20,000 units

Total Purchase Cost:

Unit price multiplied by annual usage: $0.40 * 80,000 = $32,000

Additional Costs:

As the item price is fixed and includes delivery (DDP Incoterms® 2020), there are no additional duties or transportation costs.

Carrying Cost Calculation:

For the minimum order quantity, the carrying cost is not a factor because the question specifies a fixed price per unit delivered.

Conclusion: The total cost of purchasing 80,000 units per year at $0.40 each is $32,000.

References

Incoterms® 2020 by International Chamber of Commerce (ICC).

Supply Chain Management: Strategy, Planning, and Operation by Sunil Chopra.

The Handbook of Logistics and Distribution Management by Alan Rushton, Phil Croucher, and Peter Baker.

Current Issue: The projects lack innovation and are at risk of delays and budget overruns.

Supplier Expertise: Suppliers often possess specialized knowledge, skills, and experience that can drive innovation and efficiency in projects.

Collaborative Approach: By leveraging suppliers' expertise, the organization can gain new ideas, improve project planning, and avoid past issues related to delays and budget overruns.

References

CIPS. (n.d.). Leveraging Supplier Innovation.

APQC. (2019). Best Practices in Supplier Collaboration.

Clarification Needs: The supplier provided clarifications during the debriefing that could have increased their score if included initially.

Importance of RFP Process Understanding: Ensuring that the supplier understands the RFP process is crucial to avoid similar issues in future submissions. This step helps the supplier to provide more accurate and complete responses in the future.

Revising the RFP Process: Rather than cancelling the RFP, issuing a new one, or regrading submissions, verifying the supplier's understanding focuses on improving future interactions and clarity.

Preventing Future Issues: This approach helps in preventing similar issues with other suppliers and ensures a more efficient and effective RFP process.

References

National Institute of Governmental Purchasing (NIGP). (n.d.). Best Practices for Debriefing Suppliers.

APQC. (2019). RFP Management: Best Practices.